Sportico’s Post

The sports franchise model, which dominates American soccer through leagues like MLS, has not only posed financial challenges but has also significantly affected the fans by overcommercializing their beloved sport. Franchise owners often find themselves needing to collect substantial revenues to meet hefty investment requirements. Unfortunately, these financial demands are often passed on to fans through inflated costs, impacting the affordability of the game. In contrast, the National Soccer League™ license model provides an alternative approach that not only eliminates franchise fees but also prioritizes the fan’s experience over profit margins. #ussoccer #sportsbusiness #prosports https://lnkd.in/efmr4rqB

Hello Prillionaires! Most Expensive Sports Teams – Franchise Valuations Skyrocket Into the Billions: The most expensive sports teams now cost billions, becoming status symbols for wealthy owners. This article explores the exclusive billionaire's club and the sky-high sums they pay to join it. prillionairesnews.com

It’s an exciting time for the NBA as interest in basketball continues to grow worldwide and franchises are sold for seemingly ever-growing sums of money. Per Forbes, the average NBA franchise is now valued at $3.85 billion or more than 2x the average of $1.65 billion five years ago.   My take: while costly, NBA investment remains attractive due to the league’s encouraging growth prospects and (most importantly) robust long-term ownership demand. My full thoughts are summarized in the post below. What’s your take? Drop a comment or reach out if you'd like to discuss. 🏀

This may not be the largest sports franchise sale of the year. That was the WWE’s sale to Endeavor. The Dallas Maverick sale illustrates two things 1)The value of Team ownership in Today’s $1 Trillion Sports Ecosystem. 2) The Business acumen of Mark Cuban. Mark Cuban turned 65 years old this year. That was a pivotal point for him. His first decision was to leave Shark Tank after $600 million of his capital had been invested. His economic return from those investments will be determined in the next five years as the Companies he invested in were early stage which is what prompted this business decision. It was a mathematical “tipping point” between high risk and return. He just hedged that risk brilliantly with the impending sale of the Dallas Mavericks to the Adelson Family Office for $3.5 Billion for a 57 percent equity stake in the team. He purchased the Dallas Mavericks for $285 million. To put that sale in perspective the Golden State Warriors are currently worth $7.7 billion and are the highest valued franchise in the NBA. Should the sale go through it will not be the largest Sports Franchise sale in 2023 but it is amongst the shrewdest. #MarkCuban #DallasMavericks #GoldenStateWarriors #SharkTankInvestments #NBA #SportsFranchiseOwnership #AdelsonFamilyOffice #SportsEcosystemGrowth #ZoneCapitalPartners #LinkedInSports

Arctos Partners LP has launched the Ross-Arctos Sports Franchise Index, a groundbreaking financial benchmark for North American sports franchises. Developed in partnership with the University of Michigan's Ross School of Business, this index tracks sales of team stakes across MLB, NBA, NFL, and NHL, sampling over 400 transactions since 1960. Institutional investors are increasingly viewing sports franchises as a viable investment. With an annualized return of 12% over the past two decades, it outperforms the S&P 500’s 10% and shows less sensitivity to market swings. This new benchmark aims to attract institutional investors by offering a rigorous, scientific approach to sports investing. The stability and profitability of sports franchises, supported by guaranteed media revenues and controlled costs, make this an appealing asset class for long-term growth.

Here is an interesting article written by the Sports Industry Team at Sheppard Mullin Richter & Hampton LLP, which discusses how league rules affect the value of sports franchises. It will be interesting to see if leagues make changes to their rules, or ignore them, in order to increase the pool of potential buyers and thereby increase the value of their teams for the owners.

The latest franchise valuation series from Sportico, which focuses on WNBA teams, does an excellent job showcasing why professional women’s basketball is one of the most stable and attractive growth investment opportunities in all of #womenssports.   Across the WNBA (Women's National Basketball Association), revenue is projected to increase at least 30% in 2024 (up from ~$200M in 2023). The average WNBA team is now worth an estimated $96 million, 29% higher than the average valuation of NWSL teams calculated last year.   Yes, the WNBA successfully captures the broader tailwinds associated with investor interest in women’s sports, which I covered in my most recent #ChannelChange article here on LinkedIn – but the league also has several distinct advantages relative to other women’s competitions. These include larger current revenues (40% higher per team than NWSL franchises), individual stars who are in the ‘first innings’ of their professional careers, a solid current media rights deal providing cash flow for teams ($60M/year), as well as a pending rights renewal process that could quadruple the value of media rights (in addition to securing a slice of the NBA’s own new rights deal). On top of all that, the WNBA is a clear market leader with no domestic or international competitors that can poach top talent (which can’t be said for the likes of the NWSL).   WNBA’s financial future is bright, and sustainable. Golden State Warriors President/COO Brandon Schneider said it best: “This is not a moment, this is a movement.”   https://lnkd.in/ezWn7djx   #WNBA #mediarights #sportsbusiness

Sports franchise values have compounded 13% per annum for 60+ years, 2X the rate of the S&P 500 (6.2%) and 2.2X the rate of other Media & Entertainment stocks (5.7%). This insight and many others are thanks to PE firm, Arctos and the University of Michigan - Stephen M. Ross School of Business, who created "RAFSI" (Ross-Arctos Sports Franchise Index), a real-time measure of aggregate franchise valuation for NFL, NBA, MLB, NHL teams. Here are 4 takeaways from the chart that I find to be one of the most insightful in the analysis: *Rolling 5-Year Returns by Quarter* 👇 1️⃣ Year to year swings in valuation growth rate have been dramatic, ranging from over 25% ("Dawn of Cable" in the '80s) to under 5% ("MLB Strike/Lockout" in the '90s and "NHL Lockout in the '00s) 2️⃣ Media rights ("demand factors") drive many of the positive spikes in value growth, while labor negotiations ("supply factors") often balance growth to more measured return levels. 3️⃣ As the market for franchise ownership becomes more liquid, the quarter-to-quarter changes in franchise value are becoming more responsive, and the magnitude of each value swing is decreasing to the 13.1% average. 4️⃣ This index is just the "tip of the iceberg." Challenger leagues (e.g., NWSL, WNBA, PLL, PWHL, Overtime) carry higher risk and the potential for outside returns that could match the high growth in the "Expansion Boom" era. __ 🔗 Links to explore more... RAFSI Overview: https://lnkd.in/eMWANUrQ RAFSI White Paper (May '24): https://lnkd.in/essszcPA __ ⭐️ Explore open roles by league across these major leagues (and challenger leagues) on TeamWork Online: https://lnkd.in/eBes3tJw What takeaways from this index of franchise values stand out to you (either from the list above, or others)? ⬇️ 💬

The Major League Soccer (MLS) franchise model, once championed by American billionaire overlords, has left an indelible mark on American soccer, but not without its share of shortcomings. While the MLS set out with grand aspirations, it has consistently fallen short of the benchmarks set by esteemed soccer leagues worldwide. This has resulted in a structure that not only hampers progress but also lacks the genuine competitiveness that ignites the passion of fans. Moreover, it has inadvertently isolated a substantial portion of its potential supporter base. From its inception, the MLS adopted an insular territorial approach, which, while aiming to spark local rivalries, has inadvertently stifled the growth of authentic rivalries seen in other leagues. This has translated to a diluted sense of competition among teams representing diverse cities, leading to an underwhelming fan engagement that fails to capture the fervor witnessed in other parts of the world. One of the most glaring issues within the MLS franchise model is the imposition of anti-competitive salary caps on players. These limitations have discouraged clubs from offering competitive wages, creating a culture of mediocrity that impedes the league's ability to attract top-tier talent and achieve excellence on the field. Another conspicuous omission within the MLS framework is the absence of a promotion and relegation system. While this approach may offer short-term investor stability, it deprives soccer enthusiasts of the riveting drama associated with relegation battles and promotion races. These elements are intrinsic to the sport's essence on a global scale, offering emotional investment and excitement for fans. The MLS's unwavering focus on commercial gains has led to exorbitant ticket prices, alienating the average American from the joy of attending matches. Moreover, the decision to place matches behind paywalls contradicts soccer's inclusive nature elsewhere, hindering access to prime-time content and limiting the sport's reach. Media coverage limitations and a lack of credible reporting within the MLS have further hindered its growth potential. This lack of transparency and accountability perpetuates a perception that the league prioritizes safeguarding its interests over the broader advancement of the sport. The staggering franchise fees, reaching an astonishing $500 million for a single MLS franchise, epitomize a profit-driven mentality that may inadvertently deter potential investors in burgeoning soccer markets, hindering the league's global expansion. Arguably, the most disheartening consequence of the current MLS model is its inability to nurture elite player development within its system. This has led to a consistent exodus of talented players seeking better opportunities in European leagues, where competition and intensity far exceed what the MLS can offer.

Explore the intricacies of sports investing in this insightful article, which dives into global valuations, private equity trends, and essential revenue streams for sports franchises.